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Paying for Pensions

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Cliff Taylor's item about "Balancing the Books" (Sunday, 7th October) indicates that the Government will need to borrow about �1.5 billion this year to finance day-to-day expenditure. This is almost equivalent to the amount to be invested this year in the National Pension Reserve Fund and begs some basic issues about the Fund's operation and direction:

  1. What is the economic justification for borrowing money simply to invest in overseas equities to fund future pensions? As recent market volatility has shown, this is a "good times" strategy that would be completely unsustainable in the event of any serious international or national slowdown or rise in inflation.
  2. Surely a better return could be secured for the nation if these borrowings were invested in much-needed local infrastructure, or used to displace profit-seeking private funds going into private-public partnerships, or used to bring forward projects which could encounter above-average inflation?
  3. The Fund is currently worth about 21 billion euro and will continue to grow rapidly as profits are generated and 1% of GNP is invested each year. As every taxpayer and consumer will have contributed to the Fund, what guarantees can be given that payments will be equitably distributed and not skewed towards increasingly unsustainable and unfunded pensions for politicians and the public sector at the expense of much more numerous, poorly pensioned citizens in the private sector? For example, the NPRF indicates that public service pension costs will reach 3.7% by mid-century while social welfare pensions payable to a far larger number of people will only rise to 10.1%.

As contributors to the Fund, we should be given absolute assurances that future Ministers will not treat the NPRF as a massive "slush fund" to support vested interests as done regularly in the past. The classic examples being decentralisation, benchmarking and the distribution of National Lottery funds.

Letter published in the Sunday Business Post on 21st October 2007.

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This page contains a single entry by Brian published on October 12, 2007 5:43 PM.

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